5 Key Metrics to Track Your Industry 4.0 Progress
Brian Hoey - June 23, 2020
If you’re upgrading to a smart home, it’s pretty easy to figure out whether or not you’ve succeeded. You can look around your house, and if all of your appliances have been updated to smart appliances, and whatever apps you’re using to connect with those appliances actually work, then it’s basically a done deal. All that’s left is to do is sit back and enjoy the convenience of your newfound digital connectivity.
When it comes to a smart factory, on the other hand, things can be a little bit tricky. Smart factories are the bedrock of Industry 4.0, but just because you’ve installed IoT devices in every nook and cranny, that doesn’t mean you’ve necessarily achieved successful Industry 4.0 integration. Why? Because the processes and workflows involved are so complex that the mere fact of having the infrastructure in place doesn’t mean you’re reaping the full benefits of the new technological paradigm.
This raises an important question: how can companies measure their progress as they make the ongoing transition into the fourth industrial revolution?
1. Digital Maturity Score
When it comes to Industry 4.0, it’s key to remember that effective digitization and digital transformation are hard prerequisites for getting value out of these new technologies. So, it stands to reason that the first thing you’d want to measure is how well your digital transformation efforts are actually going. This is a big enough topic that it warrants an entire blog post in itself, but the quick version is that you need to define each area of your business (strategy, operations, technology, culture, customer service, etc.) and give out grades based on their digital maturity levels. What does digital maturity mean in this context? Simply that you’re adopting new technology in a deliberate, integrated, and ultimately transformative way. If you have limited new technology integrations, or your existing technology in a given area doesn’t interact with that of other touchpoints, you’ll give that area a low maturity score. If you’re adopting new tech in a visible, integrated way that aligns with your business goals and strategies, your score is higher. Once you’ve aggregated a combined score for each relevant area, you can use that score to pinpoint areas for improvement—ultimately leveraging that digital maturity into better Industry 4.0 technology integration.
2. Forecast Accuracy
The metric above will tell not just how well you’re already doing with technology integration, but how well you’re poised to do going forward. What it won't necessarily tell you, however, is how much value your current technology is offering. To figure that out, you need to turn towards metrics that are more quantitatively rooted in concrete business realities. Perhaps the most important for our purposes is forecast accuracy. One of Industry 4.0’s primary goals is to empower you to visualize disruptions and other challenges before they occur so that you can take proactive steps to maintain on-time production and delivery. This means that the value of all of the new data you’re (theoretically) collecting from integrated software suites and IoT devices is directly correlated with how well you can leverage those data points into predictive insights. This means that it’s time to ask yourself, how accurate are your forecasts? What’s the percent error on average for analytics-based demand, parts, price, and other forecasts across the value chain? The lower your margin of error, the more you can take advantage of new and emerging paradigms and strategies.
3. Order Cycle Time
If your demand and parts forecasts are better than ever before, it stands to reason that you should face fewer shortages or overages of raw goods, and that your order cycle time will improve. After all, if you know what to expect from up and downstream in the supply chain, you should be able to plan and execute your production flows more efficiently than ever before. Ask yourself, how long does it take from when a customer order is placed to when the delivery is complete? How does that number compare to similar order cycles from before you adopted your latest technology? If your order cycle times are stagnating, it might suggest an issue with your technology integrations. If that’s the case, you’ll need to seek out bottlenecks and work to address them in whatever way seems appropriate.
4. Fill Rate
Hopefully your Industry 4.0 technology puts you in a position to avoid delays and thus improve your order cycle time. By the same token, you would expect to improve the accuracy and reliability of your order fulfillment—after all, if you can sense demand through integrated datastreams, you should be able to adjust your buffer stuck accordingly so that you don't wind up unable to fulfill a customer’s whole order. To check how you’re doing on this front, you might measure your fill rate, which is the percentage of your orders that are completed in full (e.g. the entire shipment has made it to the customer in the correct condition). If it’s a high percentage, you know that you’re successfully tracking order as they come in, then maintaining visibility throughout the entire production and logistics chain. If it’s low, on the other hand, that means orders are slipping through the cracks—suggesting that whatever tactics you’re using to improve supply chain visibility and transparency aren’t yet yielding results.
5. Customer Satisfaction
With the metrics above, you might be wondering if it’s really necessary to implement Industry 4.0 to reap all of the benefits we’re talking about. After all, many of these are the same KPIs that manufacturers have used for years in measuring success—meaning that they predate digitization and Industry 4.0 technologies. As with any other KPIs, what we’re interested in is trends. You might have had decent order cycle times before you underwent your digital transformation, but you should still be able to see improvements if you’re successfully adopting new technologies and workflows.
This same logic applies to your customer satisfaction levels. You may have been fairly adept at delighting your customers even in the pre-digital era, but the whole point of Industry 4.0 is that you can become more agile and responsive to customer demands—meaning that any improvements you make still need to be centered around the customer first and foremost. If you’re doing well on all of the other metrics we sketched out above, it seems likely that your customers are already happy. But if they’re not, or they’re not happier than they were before, then you can begin to address the gaps in your operational strategy that may be causing this lag between different KPIs. In this way, you can pinpoint the exact areas of improvement that will make the most difference to your Industry 4.0 progress.
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